Chapter8-9Business Negotiation & Signing of Contract

Key points:• Basic Procedures of business negotiation

• Main contents of sale contract

• How to communicate orally and in writing in the negotiation

• How to draft a sales contract

CaseA Japan businessman visited the Shuzhou PC

Trading Company on the morning of June 9th 2006 and negotiated the purchase of some PC parts. The Chinese Seller made an oral offer but received no response from the Japan buyer.

In the afternoon, the Japan buyer revisited the seller and agreed to accept the offer made in the morning. In the same time, the seller learned that the price of the PC parts might be going up.

In this case, what should the seller do?

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I. Form and Content of Contract Negotiation

•Business negotiation is a process by which the seller and the buyer fix the terms and conditions of transaction with the intent of arriving at an agreement.

•The purpose of business negotiation is to conclude a sales contract.

•Two forms: oral and written •

•Specific terms and general terms P146

•Specific terms of contract negotiation:Name of commodity, quality, quantity, packing, price, shipment, insurance.

•General terms of negotiation: Inspection, Claim, Arbitration, Force majeure.

•Both of the seller and the buyer pay much attention to the specific terms because these conditions vary from different transactions. The general terms are relatively fixed in each transaction.

II. Procedures of Contract P147

Four stages:• Inquiry• Offer • Counter- offer• Acceptance (Contract)

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Inquiry P148

An inquiry can be made by seller and buyer

• Seller: invitation to make an offer• Buyer: invitation to make a bid e.g.

“PLS OFFER CANADIAN MAPLE SYRUP FIRST GRADE JUNE SHIPMENT 3 MT CIP SUZHOU CHINA”

e.g.

“WE CAN SUPPLY CHINESE PIG FUR GRAD 1 SHIPMENT JULY PLS BID”

• The above inquiries have no legal effect on seller or buyer. The recipient may answer it or not.

• The inquiry can be either oral or written

Offer P149

•A proposal to make a transaction •in case of acceptance.

Offeror: the party making the offer.Offeree: the party addressed.

•Firm offer: has legal effect and is binding on the offeror within its validity.

Non-firm offer: has no legal effect (no such term in UNCCISG)

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The key words in firm offer: e.g. offer, firm offer, offer firm quote, supply, can supply book, booking, can book, bookable order, ordering bid, bidding, bid firm, firm bid.

Conditions of a firm offer:

• Must be sent to the specific person;• The content must be definite (complete,

clear, final)

at least three conditions: name, quality, price;

• Binding on both parties if unconditionally accepted;

• Validity (effects only after the offer reaches the offeree).

Offer Validity P150

An offer is no longer valid if• Expiration: offer no longer effective• Refusal: be rejected• Counter-offer: original offer ceases• Governmental prohibition

• e.g. Offer subject reply reaching here fifteenth 发盘限 15 日复到• e.g. Offer valid three days 发盘有效三天• e.g. Offer reply in seven days 发盘七天内复

Validity of the oral offer

• An oral offer must be accepted immediately

unless the circumstances indicate otherwise.

-- Article 18 (2) of United Nations Convention on Contracts for the International Sale of Goods

Offer withdraw and revocation• Offer withdrawal 撤回

The offeror can cancel the offer before it reaches the offeree 。

• Offer revocation 撤销

It means that the offeror cancels the offer after it has taken effect.

• according to continental law, offer cannot be revocable.

• according to British & US law, offer can be revocable before acceptance.

Counter-offer•Definition Replying to an offer to indicate acceptance

but changing some terms. Actually rejecting the original offer and making a new offer.

•e.g.• your offer of 11th acceptable if the shipment

is changed from June to July this year.

•Your offer is acceptable but we hope the payment by L/C can be made by D/P.

•Conclusion of a written contract•The seller and the buyer all agree to reach

a formal written contract endorsed by both parties.

Two forms:

Sales contract (more complete)

Sales confirmation (simplified)

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Sales contract & Purchase contract

• Sales contract: drafted by the seller

• Purchase contract: drafted by the buyer

• Both contract and confirmation are binding on the seller and buyer.

Content of a contract• The seller• Address:• The buyer• Address: • Terms and conditions• Packing• Port of loading & destination• Packing• Term of shipment• Terms of payment• Insurance

• Force majeur • Methods for settling disputes (Arbitration)

exercises1 、请报三公吨加拿大一级枫叶糖浆六月交货价运保

费付至中国无锡。“PLS OFFER CANADIAN MAPLE SYRUP FIRST GRA

DE JUNE SHIPMENT 3 MT CIP WUXI CHINA” 2 、我方可供中国产特级白猪鬃七月交货请递价。 “WE CAN SUPPLY CHINESE WHITE PIG FU

R SPECIAL GRAD SHIPMENT JULY PLS BID”

3. 发盘限 6 月 10 日复到• Offer subject reply reaching here June tenth.

4. 实盘有效期三天• Firm offer valid three days

5. 中国特级红、黄樱桃番茄十公吨东京到岸价每公吨六千美元，发盘七天内复

• Supply 10 m/t Chinese red and yellow cherry tomatoes USD 6000 per m/t CIF Tokyo. Offer reply in seven days.

6. 你方 11 日报价若将运期由今年六月改为七月可接受

• your offer of 11th acceptable if shipment be changed from June to July this year.

7. 贵方报价可接受但希望支付方式由信用证改为付款交单

• Your offer is acceptable but we hope the payment by L/C be changed to D/P.

Preparation of negotiation1. Information about the opposite Background of opposite companyBackground of opposite negotiator

2. Information about the subject matter Inner quotation about relative project or product International quotation about relative project or

product

3. Organization Participant in negotiationCoordination of the group

– Negotiation plan– Place arrangement

Opening of Business Negotiation• Ways of start 1. Statement with a writing material2. Direct submitting a requirement

• Atmosphere of negotiation1. High sounding2. Low sounding3. Natural sounding

• Start tactics1. Setting an example2. Exaggeration (enlarge)3. Making a fresh start4. Listing competitors5. Lure6. Coercion (forcing)

Unit 12Performance of International Trade Contract 国际贸易合同的履行

Preview Case

P 158:

A Shenzhen bicycle producer signed a sale contract with an Italian buyer to export 5000 bicycles……

Performance of Contract p158

• The basic procedure of export contract performance

• The basic procedure of import contract performance

• How to fill in goods declaration for exportation and the goods declaration for import (visit the website of the customs general Administration of P.R.C.)

The basic procedure of export contract performance

• Contract

• Seller: goods preparation;

• Buyer: L/C

• Goods inspection, Ship leasing;

• Customs declaration

• Shipment

• Preparing documents for negotiation;

• Disputer settlement if any

The basic procedure of import contract performance

• Contract

• Insurance company;

• Shipping company

• Issuing bank;

• Advertising bank / negotiation bank;

• Exporter;

• Preparing documents for negotiation;

• Disputer settlement if any

Customs Clearance for the Goods

Customs : checking and supervising the import and export. Main tasks:

• To check inward and outward goods;

• To examine the papers

• To examine and making copies of contract;

• To search means of transport;

• To make a statistic work;

• To Charge on inward and outward goods